Six reasons your business loan application was rejected

Find out what you may have missed and what you'll need to do to get approved.

Whether you need finance for investment, equipment or to manage cash flow, there are a number of requirements you will need to meet to be approved for a business loan. If your application has been rejected, it's important to understand the reason why in order to give yourself the best chance of being approved in future.

Learn about the common reasons business loan applications are rejected, how you can fix your application and compare business loans below.

Ready to apply again? Compare business loans now

Updated May 26th, 2019
Name Product Min. Loan Amount Max. Loan Amount Loan Term Application Fee Apply Now
$5,000
$500,000
6 months to 3 years
$0
A loan of up to $500,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.
$5,000
$500,000
3 to 18 months
$0
Borrow up to $500,000 and receive funding in up to 48 hours. You pay a one-off factor fee at the start of the loan, with no ongoing fees or interest payments required.
$5,000
$300,000
3 months to 2 years
$0
A business loan available up to $300,000 that can be funded in 1 business day. Must have a turnover of $6,000+ per month and provide 6 months of trading history, 3 months history for existing business purchases.
$5,000
$1,000,000
3 months to 5 years
$0
A Small Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 60 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
$5,000
$100,000
3 months to 2 years
$0
Borrow up to $100,000 on a secured or unsecured business loan or line of credit. Applications can be approved on the same day, with rates starting at 9.9% p.a.
$10,000
$100,000,000
Up to 25 years
0.75%
Borrow from $10,000 with multiple repayment options including optional fixed rate periods.
$5,000
$500,000
6 months to 2 years
Initial draw down fee
A business loan up to $100,000 for unsecured loans, or $500,000 for secured loans that you can use for any business purpose. Transparent costs and redraw facility available.
$10,000
$250,000
6 months to 2 years
2.5% origination fee
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
$2,000
$300,000
1 month to 3 years
$0
An unsecured business loan from $2,000 that offers convenient pre-approval and no early repayment fees.
$10,000
$500,000
6 months to 2 years
Initial draw down fee
A flexible business loan up to $500,000 with convenient top up and redraw facilities. Business must have been operating for 9 months+ and have monthly sales of $10,000+

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Why was my business loan application rejected?

If you've been rejected for a business loan, the lender is likely to explain the reason your application was turned down, but this is not always the case.

Here are some common reasons your loan application may have been turned down and what you need to do before you reapply:

Having bad credit

While there are bad credit business loans available, negative marks on your credit file can usually cause you to be rejected from receiving a traditional business loan. If you’re unable to honour the financial commitments you already have, lenders are unlikely to approve your application for an additional loan. Make sure you check the eligibility criteria set out by the business lender or check with the lender directly to see if your credit history will be a problem.

Lenders usually check the credit file of the company director when approving a business for a loan, but they can also check the business's credit file for bankruptcy information and other financial details.

  • What should I do before reapplying?

You can order a free copy of your personal credit report once every 12 months within 90 days of being rejected for credit. This way you're able to check for possible errors or see where you can reorganise your finances to improve your credit rating. Before you apply again, make sure you have taken steps to improve your credit rating, or look into lenders that offer loans to businesses with bad credit.

Not meeting the lender's eligibility criteria

Many lenders will require that your business meets minimum turnover and trading history requirements in order to be eligible for a business loan. Depending on the lender, this means you may need to have been operating for at least 6 months, or in some cases, up to 18 months, and have a minimum monthly turnover of $5,000. If you don't meet these requirements, it's likely your application will be rejected.

  • What should I do before reapplying?

You will either have to wait until your business meets the specific trading requirements, or find a lender that is willing to give a loan to businesses will little-to-no trading history or turnover.

Omitting documents or details from your application

Business lenders require applicants to submit detailed financial information as part of their application. This can include business plans, cash flow projections, bank account statements, tax returns and other legal documentation related to your business.

  • What should I do before reapplying?

Make sure you have submitted all requested business documentation and information, and that your financial details are up-to-date and accurate.

Cash flow issues

All businesses have cash flow problems from time to time, but if your business is regularly struggling to manage its working capital, you may struggle to be approved for a loan. If lenders see that there’s no money for day-to-day operations, it may suggest that your business will be unable to repay the loan. It's also important to note that good cash flow doesn’t automatically qualify you for a loan, but lenders are likely to look more favourably on a business with good cash flow.

  • What should I do before reapplying?

If possible, try to manage or fix your cash flow issues. Alternatively, you could consider other business finance options, such as a business line of credit, or invoice financing, which lets you get access to credit based on your outstanding invoices.

Insufficient collateral

Business loan lenders usually require that you use an asset, generally property, as security against the loan. If you apply for a secured business loan and either don't provide an asset or security, or provide one that doesn't meet their criteria, you will likely be rejected for the loan.

  • What should I do before reapplying?

Make sure you have an asset that is suitable to be used as security. If you don't have a suitable asset, there are also a growing number of alternative lenders offering unsecured business loans.

Applying with the wrong lender

Sometimes the reason your loan is rejected is that you are simply with the wrong lender. Institutions have varying lending criteria, so while a traditional bank might not grant you a loan, you might qualify for a loan from an online provider or another alternative lender.

However, if your application was rejected, you can represent a higher risk when you apply elsewhere. While certain providers may be more lenient than others, you might have to settle for higher rates and fees due to the recent rejected application being listed on your file.

  • What should I do before reapplying?

Find a different lender that better suits your needs, and one with eligibility criteria that your business is likely to meet. It may also be worth consulting a broker or financial adviser to help find a finance option that is right for your business.

Read our guide on how to get approved for a business loan


Picture: Shutterstock

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